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NIP 2014: National Infrastructure Plan - environment

The Chief Secretary to the Treasury (Mr Danny Alexander), in a Written Statement to Parliament (endnote 1) outlined the Government’s commitment to infrastructure in the build up to the last Budget for this Parliament, due in March 2015.

A summary of the new announcements in the NIP 14 in the infrastructure for Environmental service sectors is set out below:

FLOODS

NIP 14 sets out that nearly 2.5 million residential properties are at risk of flooding from surface water and over 1.5 million residential properties are at risk from flooding from rivers and the sea.

The government has published a 6-year programme of investment in flood defences, allocating the £2.3bn capital funding provided at the 2013 Spending Round. NIP 14 anticipates that the 6-year capital investment plan will:

deliver improved protection to at least 300,000 homes and help avoid more than £30bn in economic damages, including a £1.5bn reduction in potential losses for the farming sector

provide for investment in more than 1,400 schemes

benefit homes and businesses across England, including replacing seawalls at Fleetwood; building a barrage at Boston; refreshing tidal defences at the Thames Estuary; and undertaking schemes at Oxford, Lowestoft, Yalding and the Humber

attract approximately £600m of additional local contributions through partnership funding

reduce overall flood risk by 5% compared to current levels by 2021.

NIP 14 sets out that the Boston Barrage / Barrier Works due to start construction in 2017-18. The Oxford Western conveyance scheme due to start construction in 2018-19. The River Thames Scheme: Datchet to Teddington due to start construction in 2019-20.

WATER

NIP 14 does not contain any specific new announcements in the water sector. NIP 14 records that the Thames Tideway Tunnel is a key element of the programme to modernise London’s aging sewerage network and the project received development consent in September 2014. Following the government’s decision to specify the project under the Water Industry Act it will be designed, financed and operated by a separately regulated Independent Infrastructure Provider. Thames Water is currently procuring through competition both the Infrastructure Provider and the main contractors for the construction. Contract negotiations should be completed in mid-2015 with construction due to start in 2016.

The water industry operates on five-yearly cycles called asset management periods. Ofwat has now published draft determinations setting the price, investment and service package that water companies should provide for the next asset management period (AMP6), which will begin on 1 April 2015. Ofwat’s final determinations will be published on 12 December 2014.

Major projects and programmes due for delivery in AMP6 will be confirmed in companies business plans once the final determination has been published.

The Water Act will, for the first time, mean all businesses, charities and public sector customers in England will have the freedom to switch supplier from 2017.

Longer term

Following AMP6, Asset Management Period 7 will run from 2020 to 2025. The price review process for AMP7 is expected to involve a similar total expenditure (TOTEX) and output-based approach to that taken in PR14.

Companies produce Water Resources Management Plans which set out how they will balance the demand and supply of water over the long-term, taking account of factors such as population growth, economic growth and climate change. Companies consider options from managing demand as well as options for developing new sources of supply, for example reservoirs. The plans are subject to public consultation and the Environment Agency provides technical advice to the Secretary of State, who decides whether each company should publish its proposals as a final plan.

Most water companies have now published the final version of their latest plans (covering 2015 to 2040). The companies will begin consulting on their next plans in 2018.

WASTE

NIP 14 does not contain any specific new announcements in the water sector. NIP 14 records that there are some 20 existing waste PFI and PPP projects representing almost £2bn of investment between now and 2020-21 in the infrastructure pipeline, 11 of which are already in construction.

In July 2014, the European Commission published proposals as part of a review of resource and waste management policy and legislation, including key targets in EU waste legislation. The government is committed to the negotiation and implementation of proportionate EU agreements, and has made clear that it would not support new targets at an EU-level unless there is a clear economic and environmental case to do so.

The current period of negotiation on the European Commission proposals is expected to conclude between 2016 and 2018.

It is only once these negotiations have substantively concluded that the government expects to have sufficient clarity to decide what further action, including on infrastructure, will be necessary to meet any revision of the targets.